SALES & MARGINS: The Top Three Mistakes Managers Make
SALES & MARGINS
WHEN I WROTE MY BOOK, 30 Ways Managers Shoot Themselves in the Foot, I chose for the first chapter the importance of pinpointing responsibility because I believe one of the top management pitfalls is the unwillingness to delegate.
Management Mistake #1
Refusing to delegate. Many times the owner or general manager is the most knowledgeable capable person in the company; he or she can perform several tasks better perhaps than anyone else. The problem arises when managers decide that they are the only people in an organization who can really perform a task “right.”
I once knew an owner who was convinced he was one of the best lumber buyers in the world. He made purchasing into a science. He had computerized spreadsheets, he subscribed to a number of newsletters to stay informed and he kept his ear to the ground by staying in touch with a handful of trusted advisors.
The problem was not with the quality of his buying. In fact, his track record was quite good. The problem came with the efficiency in other areas of the business. As an example, no one was coaching the dispatcher. He had no goals. He had no way of keeping score nor could he know for sure how he was performing in his job. The same was true of the credit manager; she never knew how the owner thought she was doing in measurable terms. He would bark at her from time to time, but he never took time to sit down and ask her questions and listen to her answers.
So ask yourself: Is the success of your business limited by your own personal physical and mental stamina? There’s just so much that any one person—no matter how talented —can do and do well.
Management Mistake #2
The second mistake I see managers making is failing to hold their people accountable for measurable results. Have you ever told your yard foreman that the next time you walk out onto the yard, you want it to be clean? Most owners and managers certainly have. Well, how about this question: Have you ever gone back out to the yard to inspect the yard foreman’s progress and been disappointed in what you saw?
The reason many times is because the owner’s or manager’s idea of clean is substantially different from that of the operations manager or yard foreman.
Try this: Prepare an inspection checklist. Describe clearly what your definition of clean is so that the person you’re holding accountable will know in no uncertain terms what is expected of him.
So often managers are guilty of saying to a salesperson: “If we are going to have a long term relationship, you’re going to have to generate more sales at a higher margin.” But he never tells the salesperson the dollars of sales or the amount the gross margin needs to be increased. He fails to express his request in measurable terms.
I try to persuade my clients to hold their salespeople accountable for achieving a budgeted amount of sales and gross margin, and tie their compensation to their ability to achieve the goal they agree upon.
Management Mistake #3
Failure to establish minimum conditions of employment. In other words, make sure all employees understand in measurable terms what they have to accomplish to keep their respective jobs. Examples:
• How many new customers and how much “new business” must a salesperson achieve in a given period of time?
• What inventory turnover must the buyer achieve at a minimum?
• How many average collection days must the credit manager achieve at a maximum?
• How much bottom line profit must the general manager achieve at a minimum?
When each of the people reporting to the owner or general manager know in measurable terms what they must do to earn an A grade, you have made a giant leap toward a professionally managed organization.